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Chapter 2: Hotspots for renewable M&A

Chapter 2: Hotspots for renewable M&A

Renewable energy deal activity continues to heat up.

China, Germany, the UK, India and France are all expected to see the biggest increase in
renewable energy M&A activity over the next 12 months.

Key messages

China and Germany are the top spots for renewable energy deals in the near future. China’s appeal is being driven largely by government spending — it announced it would invest 2.5 trillion Yuan (US$377 billion) in renewable power generation by 2020. Germany is the top western European country for investment in the next 12 months.

In France, the election of Emmanuel Macron as president has increased the appetite for investment, according to 62 percent of respondents. Macron has promised he would continue efforts to simplify planning procedures, phase out coal, and double wind and solar capacity by 2022. EDF plans to install 30GW of solar capacity between 2020 and 2035 in France.

The UK and India are both attracting attention from investors. According to 26 percent and 21 percent of respondents, respectively, both countries will see increased M&A activity in the next 12 months.

Germany

Progressive energy policies are the key to Germany's highly anticipated M&A activity -- it takes the top spot as the western European country most respondents (43 percent) are likely to invest in over the next 12 months.

Germany's approach, as stated by the Federal Ministry for Economic Affairs and Energy, is to “fundamentally alter Germany's energy supply: away from nuclear energy and fossil fuels and towards renewable energy. By 2025, at least 40 to 45 percent of our energy is to be sourced from renewable energy, and we want to raise this to at least 80 percent by 2050.”1

This Energiewende or `energy transition' is ongoing and government policies -- such as the Renewable Energy Sources Act from 2000, which originally encouraged renewable energy through feed-in tariffs -- have been implemented to maintain this momentum.

France

The election of Macron has increased the appetite for investment in France, according to 62 percent of respondents. In his election manifesto, Macron said he would continue efforts initiated by the previous governments to reduce France's reliance on nuclear generation, phase out coal and double wind and solar capacity.

The French government has committed to providing a clear transitional roadmap with new targets a year from now.

Nearly a third (30 percent) of respondents based in France say improved incentives/feed-in tariffs (FITs) would be most likely to increase their appetite to invest in the country's renewable sector.

“There's definitely going to be an easier investment space in France now,” believes the strategy director of a Norwegian oil and gas company. “We're expecting investor-friendly policies in France, such as tax incentives, as it intends to double its green energy.”

“There is no doubt that the French government wants to make a big step in renewables. France has the second-largest offshore wind farm capacity in Europe and opportunities are huge.”
- Éric Jacquet, KPMG in France

The BRIC economies

Among BRIC (Brazil, Russia, India and China) countries, 35 percent of respondents say they are most likely to invest in China over the next 12 months, followed closely by Brazil (33 percent) and India (28 percent). Just 4 percent say they are most likely to invest in Russia.

The Americas

The US While 10 percent of respondents say the US is one of the top two countries where they expect to see the greatest rise in M&A activity in renewables over the next 12 months, much of that will be influenced by the current administration's stance. For example, renewable energy tax credits were cut in the Republican tax bill launched in November 2017 and there are signs that this trend is set to continue under the current administration.

Mexico Major reforms in Mexico's electricity sector in 2014 have paved the way for increased private investment. The Mexican government's clean energy generation targets are ambitious: 25 percent by 2018, 30 percent by 2021, 35 percent by 2024 and 50 percent by 2050.

Africa

According to respondents, three countries in Africa are hotspots for investments in renewables in the near future:

South Africa

South Africa, a clear leader among African economies, was chosen by 46 percent of respondents, who said they would be most likely to invest there over the next 12 months.

Nigeria

Despite it being Africa's largest economy, only 21 percent of respondents cited Nigeria as the African country they were most likely to invest in over the next 12 months. The country has made strides in recent years to develop its renewables market, bringing in the FIT for Renewable Energy Sourced Electricity regulation in 2015.

Morocco

Under the auspices of the Office National de l'Electricité (ONE), Morocco's plans for renewables are ambitious and, as demonstrated by the Noor-Ouarzazate Concentrated Solar Power Project, definitely achievable. The project is expected to produce 580MW at peak when finished.